Ohio Administrative Code Title 122:22 - New Markets Tax Credit
Ohio Administrative Code — Title 122:22: New Markets Tax Credit (NMTC)
Overview
The Ohio New Markets Tax Credit program is designed to encourage private investment in economically distressed communities in Ohio by providing state tax credits to investors who make qualified equity investments in designated Community Development Entities (CDEs). The program mirrors the federal NMTC program and aims to spur economic growth, job creation, and development in low-income areas.
Key Components
1. Purpose
To attract private capital to low-income communities in Ohio.
To support economic development projects that create jobs, stimulate local businesses, and revitalize neighborhoods.
To leverage federal New Markets Tax Credits while providing additional state-level incentives.
2. Definitions
Some key terms defined in the rules include:
Community Development Entity (CDE): A qualified organization certified by the U.S. Department of Treasury to receive NMTC investments.
Qualified Equity Investment (QEI): An investment made by an investor in a CDE that is used to finance qualified low-income community businesses.
Low-Income Community: A census tract meeting the income and poverty thresholds defined under federal NMTC law.
Investor: Any individual, corporation, or entity that provides capital to a CDE in exchange for tax credits.
3. Eligibility Criteria
To qualify for Ohio NMTC, the investment must meet the following:
The CDE must be certified by both the federal Treasury and the Ohio Department of Development.
Investments must be made in businesses or projects located in designated low-income communities in Ohio.
Projects should demonstrate economic impact, including job creation, increased community services, or business development.
4. Allocation of Tax Credits
Ohio NMTC provides investors with a state tax credit equal to a percentage of the qualified equity investment in a CDE.
Credits are typically allocated over a multi-year period (for example, five years), reducing the investor’s state tax liability.
There is a cap on total credits awarded each year to ensure fair distribution among eligible investors and projects.
5. Application and Award Process
CDEs or project developers submit applications to the Ohio Department of Development.
Applications are reviewed based on:
Economic impact on the low-income community
Number of jobs created or retained
Financial viability and sustainability of the project
Credits are awarded based on a scoring system or ranking, ensuring that projects with the greatest community benefit are prioritized.
6. Compliance and Reporting
Investors and CDEs must maintain detailed records of all investments and the use of funds.
Annual reporting is required to ensure that projects continue to meet the program requirements.
Failure to comply with reporting or investment requirements may result in recapture of the tax credits.
7. Recapture Provisions
If a project fails to meet the program requirements within a specified timeframe, the state may recapture some or all of the awarded tax credits.
Recapture provisions ensure that the program delivers tangible benefits to low-income communities and prevents misuse of credits.
8. Interaction with Federal NMTC
Ohio NMTC is designed to complement the federal New Markets Tax Credit program.
Investors may be able to claim both federal and state credits for the same investment, subject to compliance rules.
CDEs must coordinate reporting and compliance to meet both federal and state requirements.
Key Example Cases
A manufacturing company in a low-income Ohio census tract:
Receives investment from a certified CDE.
Creates 50 new jobs over three years.
Investors earn state NMTC credits over five years, offsetting their Ohio tax liability.
A community health clinic in a designated low-income area:
Receives equity financing through a CDE.
Expands services to underserved populations.
Investors claim Ohio NMTC credits while contributing to public health.
A retail development in a struggling neighborhood:
Investment finances construction of commercial space for local businesses.
Local entrepreneurs are hired, boosting the economy.
State tax credits are awarded to investors, encouraging future investments.
A renewable energy project in an economically distressed area:
CDE invests in solar farm construction.
Creates temporary and permanent jobs, stimulates local economy.
Ohio NMTC credits incentivize investors to participate in sustainable projects.
Small business expansion through CDE financing:
CDE invests in a low-income community small business.
Business opens a second location, hiring local employees.
Investors claim credits, while the community benefits from job creation and service expansion.
Summary
The Ohio New Markets Tax Credit program under Title 122:22 provides state tax incentives to investors who fund projects in low-income areas, leveraging federal credits while fostering job creation, economic development, and community revitalization. Key elements include eligibility, application, allocation, compliance, and recapture provisions.
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